The proposed Fair Tax will have a significant impact on RVers, retirees, and those also approaching retirement. In addition both the RV industry and RV services providers will be affected.

RVers, Retirement, and the Fair TaxAs the rhetoric around our upcoming Presidential primaries heats up, it is important to pay close attention when candidates start talking about the Fair Tax proposal. While the simplification of the tax laws is very beguiling, there are major shortcomings in the Fair Tax proposal that can affect any one nearing retirement, or currently retired.

Those enjoying the RV lifestyle, nearing retirement, or retired will find that the Fair Tax proposal would implement a Federal sales tax of approximately 30% sales tax on the purchase of any new RV or toad, fuel expenses, RV resort and campground sites, and RV service, repairs, and insurance. The fair tax will also apply to any new home, utilities, insurance, rent, medical expenses and more.

In addition it would appear to have a disastrous impact on the RVers and drivers who trade in the RVs and personal vehicles every few years because they enjoy having new vehicles and the dealers who sell autos, trucks and RVs.

What is the Fair Tax? - The Fair Tax would replace all Federal income taxes related to corporate, business, estate, gift, and personal income, and the Payroll Tax (Medicare and Social Security) with a Federal retail sales tax of 30% on the sale of all services and new goods to provide the funding to run the US Government. Under the proposed Fair Tax plan, Businesses do not pay the 30% Federal sales tax, but Federal, State, and local governments will have to pay the tax.

The proponents say the cost of new products and services in the US has embedded costs totaling approximately 23% of the sales price for administering and paying the appropriate business income taxes and employee payroll taxes,.i.e. a product selling for $100 has $23 of embedded costs.

In addition, they make an unlikely assumption that businesses will reduce the prices of goods and services by the amount of their embedded taxes (up to 23%); substantially offsetting the 30% Federal sales tax applied to new purchases and all services, and may provide salary increases to their employees.

Unfortunately, the providers of goods and services will have no legal requirement to reduce prices and there are no procedures to determine what, if any, reductions are actually made.

It is also very difficult to arrive at the embedded costs for many businesses, that will be quick to say their pricing and costing processes are trade secrets. Many items, such as oil, are substantially extracted or manufactured, and processed outside the United States with only minimal distribution costs subject to US tax laws.

To help offset the impact of the 30% Federal sales tax for low income families, the program will offer a prebate in the form of monthly checks to single people ($196), married couples ($391), and dependent children ($67). However, the Fair Tax will also eliminate all current tax credits such as the Earned Income Credit, Credit for child and dependent care expenses, Foreign tax credit, elderly or disabled, etc.

Will the Fair Tax Result in Reduced Prices for Products and Services? – The track record for reduced prices brought about by substantive changes in tax policy, free trade policies, technology, manufacturing, productivity improvements, and the global economy is a mixed record.

Disturbing examples of windfall profits by US corporations in the past speak volumes. Look at the deregulation of the electric power generation and distribution that generated record profits and permanent long-term price increases to consumers; and Healthcare industry advocates stating that the "free market" healthcare HMOs were more efficient but required a 12% bonus to offer Medicare Part C over and above what Medicare was already obtaining from the healthcare industry for beneficiaries using Medicare Parts A and B.

The US pharmaceutical industry that manufactures around the globe, is given protection from allowing people to purchase prescription drugs outside the US, and gives Americans the highest prescription prices in the world.

There is nothing to stop the preponderance of profits resulting from savings achieved by moving jobs off shore, reducing employee wages and benefits, and importing manufactured products from going straight into executive bonuses and perks, and executive retirement programs.

Based upon how many business handled previous reductions in cost, there is a distinct possibility that much of a 23% embedded cost reduction in costs can disappear long before it hits the consumer prices or employee wages and salaries.

Impact on Retirees - The Fair Tax proposal works directly against the needs and contribution of tens of millions of current retirees and increasing numbers of baby boomer retirees now beginning to retire.

The Fair Tax requires retirees, most of whom have a Federal Tax obligation of less than 10% of their gross income and no payroll tax, to pay a sales tax of 30% on all their purchases of services and new products using the proceeds of retirement income, including pensions, IRAs, 401-k, Social Security income (see note below), and Roth-IRA (currently tax free).

Note: Social Security is currently tax free for many retired individuals and couples, and only partially taxed for the rest.

Observations -The Fair Tax program shifts the raising of tax revenues to finance the US Government operations from the business community (reduced to zero) and higher income Americans directly to the Middle Class families (including children) and retirees. All Americans (children, working, and retired) will be paying a 30% tax rate on services and new products from the hospital bill for their birth to their casket when they die.

Do you really want to pay a 30% sales tax on your next new RV, car, house or boat, or your insurance expenses? Do you think the cost of utilities, heating oil, or fuel (or anything) will go down by 23% of the current costs for these items? Can your family handle paying a 30% sales tax on medical care, dental care, and health insurance? How will you feel about selling a house, car, RV, or boat you purchased new and were advised that the resale value did not include the 30% Federal sales tax you paid?

Do you really think the large US and International corporations will be willing to pass the savings they incur from reducing their embedded costs to their customers? These are the same corporations that threaten to move the corporate headquarters and tax home to Bermuda, Dubai, or the Cayman Islands when too many questions are asked.

We recommend all Americans carefully listen to what all Presidential candidates say about where tax revenues will come from and how they propose to protect the integrity and security of all jobs and retirement income sources (Social Security, private and public pension plans, 401-k, and IRAs) to determine just who the candidate is actually representing and if they will represent your needs.